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Flipkart, a leading Indian online market place, has committed to pushing newer categories such as furniture and groceries over the next three years.

Driving grocery growth

Flipkart currently provides online grocery services in four cities in India, adopting the monthly basket approach. Its CEO Kalyan Krishnamurthy commented that Grocery is by far one of the most difficult businesses Flipkart has launched. In the long-term, Flipkart may invest in or partner with offline retailers in groceries and furniture to become a leader in these categories.

Building an ecosystem

Walmart bought Flipkart in May 2018 and has increased its stake to more than 80% since then. The Flipkart group currently has Myntra and Jabong, two online fashion retailers. It is reported that Flipkart may either partner with a video content firm or build out its own content offering, as part of Flipkart’s loyalty programme, which was launched a few months ago.

Chief business officer for Walmart India appointed

Following the departure of its chief operating officer, Walmart India has announced Mr. Sameer Aggarwal as its chief business officer. Mr. Aggarwal will now oversee strategy, merchandising, cost analytics, ecommerce, technology, marketing and replenishment for the retailer in India.

According to his LinkedIn profile, Mr. Aggarwal has worked previously for Yum! Brands in Thailand and Sainsbury’s in the UK. He joined Walmart India in April of this year as the executive vice-president, chief strategy and administrative officer. He will report to country CEO Mr. Krish Iyer.

In addition, the retailer has hired Mr. Anuj Singh as head of category merchandising. Mr. Singh brings with him more than 20 years of experience from Nestle, Philip Morris International and Hindustan Lever. He will lead merchandising programmes across all categories as well as private label development for Walmart India.

Movements in Flipkart’s management team

Flipkart’s chief executive officer, Mr. Kalyan Krishnamurthy, has also announced key appointments within its various departments. He has named key personnel to head up Flipkart’s grocery, appliance and smartphones business units.

These management changes should place both Walmart and Flipkart in a better position to compete in India’s grocery retail market

With the acquisition cleared to proceed, Walmart’s presence within India is expected to strengthen significantly. In addition to its existing 21 cash and carry stores, Walmart now has greater access to one of the most attractive retail markets in the world.

At the same time, competition within this relatively untapped channel is expected to intensify. Along with the established players of Amazon India and the Alibaba-backed BigBasket, the battle for grocery ecommerce in India is set to increase.

More about Walmart India

In a statement released after the CCI announcement, Walmart said, “The combination of Walmart’s global expertise and Flipkart will position us for long-term success and enable us to contribute to the economic growth."

Walmart has made its boldest move in India by acquiring an approximately 77% stake in Flipkart, the country's leading ecommerce operator, in a $16bn deal.

What's going to happen?

The world's largest grocery retailer has agreed to acquire an approximately 77% stake of Flipkart for US$16bn, which would make it the largest deal in India's ecommerce space. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global Management and Microsoft. The deal is subject to regulatory approval.

"India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of ecommerce in the market," said Doug McMillon, Walmart’s president and chief executive officer. "As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market."

Source: Walmart

The retailer has also announced these initiatives with the acquisition:

The immediate focus will be on serving customers and growing the business, while Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future

Supporting small business and ‘Make in India,’ through direct procurement as well as increased opportunities for exports through global sourcing and ecommerce. Walmart will partner with kirana store owners and members to help modernise their retail practices and adopt digital payment technologies

Support farmers and develop supply chains through local sourcing and improved market access

How does it fit in Walmart's strategy?

Walmart has been eyeing the Indian market for more than a decade. It set up a joint venture with Indian conglomerate Bharti in 2007 and opened Best Price Modern Wholesale stores. However, in October 2013, the companies announced that they were dissolving their partnership. Though Walmart has continued to operate the 21 stores, it has been difficult for Walmart to expand further in the country due to government rules about foreign ownership in the retail sector.

On the other hand, Walmart is forging a new approach to its international businesses. One of its key strategies is to moderate its global physical growth, with comp store sales and ecommerce to account for the majority of total sales growth moving forward. It has dropped the word "stores" from its name, and has formed partnerships with ecommerce firms such as China's JD.com and Rakuten from Japan.

"Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart," said Judith McKenna, president and chief executive officer of Walmart International. "This investment aligns with our strategy and our goal is to contribute to India’s success story, as we grow our business."

And for Flipkart?

Flipkart is India's largest online marketplace. Founded in 2007, Flipkart sells eight million products across 80 categories. It has 100 million registered users, 100,000 sellers, 21 warehouses, 10 million daily page visit.

In the fiscal year ended March 31, Flipkart recorded GMV of US$7.5bn and net sales of US$4.6bn with 50% year-over-year growth.

However, Flipkart has been facing fierce competition, especially from Amazon, which has ambitious plans for India. As Jeff Bezos stated in his annual letter, "Prime added more members in India in its first year than any previous geography in Amazon's history." A retailer like Walmart with grocery and supply chain expertise would help the ecommerce company stay competitive against Amazon.

What do we think?

India's ecommerce market is a huge, yet relatively untapped territory that is growing rapidly. Walmart's acquisition of Flipkart and Amazon's continuous investment will fuel the growth of the market, especially for the grocery segment. This acquisition would enable Walmart to have a stronger foothold in India, and also is aligned with its broader strategy to become an omnichannel retailer.

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